my message may have gone through before I finished...so here

Resolved Question:

my message may have gone through before I finished...so here it is again.

1) I am disabled. Will I still be charged the 10% penalty for early withdrawl on my 401K2) I received approx. 26,000.00 in social security disablilty.3) I would like to withdrawl 60,000.00 or 70,000.00 to purchase a condo (It would not be considered a new homeowner purchase.)4) My question is, what percentage I will need to put withdrawl from the 401K, to cover the purchase price and the taxes and any penalties. The total amout needs to be a withdrawl, so the taxes would also be considered a withdrawl, right?

Hello! I am a CPA here to assist you with your tax questions. My goal is to provide you with excellent service today.

Megan C :

How are you today?

Customer:

Sadly, I have the flu

Megan C :

In order to avoid the 10% penalty you would need to be considered permanetly disabled

Megan C :

Oh man, I'm so sorry.

Customer:

I am permanently disabled

Megan C :

Yes, you receive social security so you would meet the IRS definition of disabled.

Customer:

how much tax will I be assessed and when I roll that into the 70K I want to withdrawl, what would be the total amount taken out of my 401k

Megan C :

Also you will owe tax on the withdrawal, and typically the administrator will hold 25% back for taxes

Customer:

I will be above 25% tax bracket, because they will add my ss income as taxable. That is what they did last year

Megan C :

So you will be in the 28% tax bracket - are you married or single?

Customer:

single

Megan C :

Let me look at the bracket to make sure.

Customer:

thanks

Megan C :

Yes, you would be in the 28% tax bracket.

Customer:

OK, so if I withdrawl 70K for the condo, and they put aside 28% of that for taxes, what would the total amount of the withdrawl? (I think they tax me on the 28% tax withdrawl as well as the amount of funds I need)

Megan C :

Yes, if you withdrew 70,000 you would have $19,600 withheld for taxes, so you would get $70,000 - $19,600

Customer:

OK then. How much taxes do I need to put aside, so that I can get the full 70,000 for the condo? Is there a calculation for that?

Megan C :

Yes let me do that for you.

Customer:

if you could also give me the equation, so that if I need to withdrawl more or less, I can figure it out?

Megan C :

If you withhold $97,222 you will net $70,000

Customer:

but, won't they add in my social security ($26,000) as income? That would put me in a higher bracket, I believe. That is what the CPA told me last year.

Megan C :

You're still in the 28% bracket with your IRA withdrawal

Megan C :

and the Social Security

Megan C :

You're in the 28% bracket up to $183,000 of income

Megan C :

so you're not going higher than 28%

Customer:

that's great. Because I have no savings and my ss is my only income, I want to make sure that I withdrawl enough to cover all taxes.

Megan C :

I understand.

Customer:

So, when I make the withdrawl, I tell my 401k to also put aside 28%? or how do I tell them what I want to do?

Customer:

would they just use the calculations you did for me? What is the equation, so that I can know and double check there work.

Megan C :

Well, they will probably just withhold 20-25% they don't typically give you an option on how much

Megan C :

and then you would set the rest aside or send in an estimated payment

Customer:

If they do that, how will I know how much more I have to withdrawl

Customer:

can you give me the equation?

Megan C :

If you withdrawal $97,222 subtract out $27,222 to arrive at the $70,000 that you need

Customer:

Oh, I see what you're saying now. I would still withdrawl the 97,222, but send in the difference myself.

Megan C :

Yes, that is correct.

Megan C :

Is there anything else that I can assist you with today?

Customer:

will our conversation be saved? I just tried to do it and now I cannot see the conversation

Customer:

will it be emailed to me?

Customer:

I messed up

Megan C :

Yes, it will. Once you rate, your answer will be emailed to you

Megan C :

It's not lost. No worries. Also, when you log into JustAnswer you will be able to pull it back up

Customer:

Whew. OK, then. I believe I got the information I need to go condo shopping and have enough money to pay for my taxes.

Excellent information, very quick reply. The experts really take the time to address your questions, it is well worth the fee, for the peace of mind they can provide you with. OrvilleHesperia, California

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